The Los Angeles Dodgers filed for bankruptcy in a Delaware court on June 27th, making it the third baseball team to file for bankruptcy in the past three years.
Upon filing, the team was cleared to borrow $60 million to pay salaries and run operations while working out a long-term solution to its financial problems. On July 22nd, a bankruptcy judge decided against Dodgers owner Frank McCourt's plan to acquire a $150 million loan from a hedge fund, meaning the team may need to seek financial help from Major League Baseball instead.
According to a statement from a Dodgers official in court just two days prior to the judge's decision, the MLB loan was a cheaper option but would give the league more control over the team. The MLB loan was offered at a lower interest rate than the 10% that the Dodgers had originally agreed to pay.
Since April, the team has been operating under a trustee appointed by Commissioner Bud Selig. Under a league provision that allows for the termination of the franchise of owners who file for bankruptcy, Selig may be able to seek a judge's permission to remove McCourt as the owner of the team.
It appears that the Dodgers and Major League Baseball are at odds after releasing opposing statements that essentially blamed the team's financial problems on one another. According to McCourt, the team brought the commissioner a media rights deal that would have solved their cash-flow problems, but the deal was vetoed. According to Commissioner Selig, McCourt has saddled the team with debt and has dipped into team funds to pay for personal expenses. McCourt's divorce with his wife, who claims to own half the team, has also been a subject of much contention in the matter.
Court documents show Manny Ramirez, who has retired from baseball, as the Dodgers' biggest creditor. Ramirez is owed nearly $21 million. Other creditors include outfielder Andruw Jones, who is owed $11 million, pitcher Hiroki Kuroda, who is owed $4.5 million and Vin Scully, who has been calling Dodgers games for 62 years and is owed $153,000.
Unlike most bankrupt companies, however, the Dodgers assets exceed its liabilities, which may give the team room for maneuvering that can allow for a swifter resolution to its financial problems.
Looking to learn more about bankruptcy and other debt-related matters? Contact a Long Island bankruptcy lawyer at Jacoby & Jacoby today.